HSBC billions for investment arm

BANKING giant HSBC is attempting to boost business at its struggling investment banking arm by bringing it under the umbrella of the main commercial bank. The investment bank, which performed badly last year because of falling stock markets, is beset with discontent after many traders had their bonuses cut to zero. HSBC was forced to issue a denial that dealers were staging a 'go-slow' in protest.

Chairman Sir John Bond wants to subsume the investment bank into the rest of HSBC's operations. His manoeuvre will allow the operation to draw on its parent's gargantuan £200bn balance sheet, enabling it to do bigger deals.

HSBC avoided the investment banking crises suffered at rivals such as Barclays and NatWest in the Nineties thanks to its highly conservative approach. But critics say its latest move could be risky because it may allow investment bankers greater scope to gamble shareholders' money.

Bond will need the approval of Parliament before the investment bank, which is a separately incorporated company, can surrender its licence. The change is likely to take effect from this summer.

Sources said the reorganisation is a fillip for Stephen Green, head of investment banking. Green is tipped as a possible successor to chief executive Keith Whitson.

Traders at rival banks attempting to carry out transactions with HSBC suffered a sharp slowdown in business last week as its dealers, whose salaries, even without bonuses, are typically above six figures, appeared to be operating a 'work-to-rule' in outrage at the bonus cuts.

HSBC is forecast to report profits of nearly £7bn for 2001. Broker Teather & Greenwood, which advises investors to sell, warns that it had a £3.4bn exposure to Argentina in June last year and may be forced into large bad debt write-offs.